CreditAccess Grameen, Bandhan Bank and Other NBFC Shares Zooms 12% Following RBI’s Circular

Following RBI’s recent announcement to slash risk weights, shares of banking majors cheered with gains on February 27.

While shares of Bandhan Bank soared by 8%, CreditAccess Grameen went up by 12%. Shares of L&T Finance gained by 6%.

AU Small Finance Bank, Shriram Finance, Aditya Birla Capital, M&M Finance, Poonawalla Fincorp saw gains in the range of 3-4%.

On February 25 the Reserve Bank of India (RBI) announced to reduce risk weights for banks who lend to NBFCs. The weightage has been reduced to 100% from 125%.

Previously, the central bank increased risk weights on consumer credit, which includes personal loans and bank credit to NBFCs from 100% to 125%.

Citi Bank said that the move will boost CET-1 ratio by over 45 basis points for Bank of Baroda, while it would be ranging between 35-45 bps for lenders including Federal Bank and PNB. SBI, HDFC Bank and Kotak Bank will see a boost of 30 basis points.

Morgan Stanley believes that the move will reduce cost of funding for borrowers, while also boosting investor sentiments.